Railway nationalizations could be on the way out

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Some UK rail franchises could be nationalized when the emergency agreements put in place during the coronavirus pandemic expire on Sunday.

Insiders said talks between the government and training companies on new deals were going “to the end.”

The government has pumped billions of pounds into the railways to cover declining ticket revenues due to low passenger numbers during the pandemic.

But sources said some contracts could be returned to the government.

Many private operators are expected to remain in place under similar emergency arrangements, but some may decide to opt out.

The Transport Department said discussions were “underway” and would not comment on the commercially sensitive negotiations.

Imminent due date

In the House of Commons Thursday, Labor’s Jim McMahon said it was “absolutely astounding” that Transport Secretary Grant Shapps did not have an update on the situation at such an advanced stage.

A deadline for this Sunday has been in place since March, when the current emergency contracts were signed.

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Mr Shapps said it was fair that negotiations with nine different companies did not take place “in public”.

Entering into new agreements, even those that are likely to cover only the short-term control and finances of the railways, is complicated by two main factors.

The first is that no one can say when the number of passengers on the railways will return to pre-pandemic levels.

The second is the fact that some rail companies were losing money before the pandemic.

Poor performance

In fact, at the start of the year, ministers were about to announce an overhaul of British railways.

The reliability of some networks was poor and some rail companies were losing money.

The government took control of operator Northern in January. South Western Railway was heading in a similar direction.

But when the pandemic struck, contracts between the Ministry of Transportation and private companies were suspended, not abandoned.

This means that some financial obligations from this period remain.

This context and the uncertainty about the future number of passengers, and therefore the commercial viability of the railways in the longer term, mean that some rail operators may be tempted to withdraw.

Future plans

Even if all rail operators sign a series of new emergency contracts by Sunday, a longer-term deal has yet to be struck.

The Transport Department would support a move towards a “concession model” for railways, which is already in service on Merseyrail and the London Overground.

This means that private companies run services for a fixed fee and that any loss or profit goes to the responsible government.

This system, which diverts the risks of private companies, would be favored by rail companies operating large and complex commuter networks.

The operators in charge of long distance networks want to retain some of the commercial flexibility they had in the past, on things like pricing.

However, the long-term puzzle solving is made more difficult by the resurgence of the virus and the uncertainty that increases the number of passengers.

For now, government guidelines on social distancing are supposed to limit the number of passengers on trains to around 40% to 50%.

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